Understanding the compounding effect and how to start applying it!
Compound effect ((AKA exponential growth, when we have a constant rate growth over time) & (AKA Geometric progression when the common ratio is bigger than 1))
Human beings are not ready to think in terms of exponential growth. Our brain always tries to think in a linear way. When you follow a linear thinking progression, you know exactly the number of steps that you have to take. On the contrary, by following geometric progression it’s difficult to calculate where you are going to end up.
What is compounding? Compounding is the process in which you are able to obtain massive value from a series of small decisions made consistently over a long period of time, in one domain. For example, a cent of euro that doubles in value each day for 31 days ends up being worth over $10 million euros.
How to start?
Understand the process of compounding. Your goal is to have a degree of control over the creation of value through future events/decisions.
Select a domain where to apply the mental model in your life (finance, investments, friends, business, productivity, health, etc.).
Understand your starting point. Compounding works faster when the rate of growth depends on the value you already have. The more you have at the beginning, the better.
Double prepare your mind. In exponential environments, the growth mindset of resilience and endurance is very critical. Since feedback is sparse and generally negative during the initial part of the curve, it takes a lot of dedication to persist.
Bottom line, remember that your decisions shape your future. Pursue the exponential effect, rather than the linear. When it occurs, you will see the magic happen.
TL;DR > Read the CARD
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